Switzerland-Lao PDR Soci-Economic Development Consulation Seminar for Land-locked Settings

SWITZERLAND
Some interlinked fundamentals of Switzerland socioeconomic development
First session
 Political system
 Stability (political and economic)
 Monetary policy
Second session
 Connectivity
 Education
 Environment protection
Third session
 Investment
 Small and Medium Enterprises (SME)
 Banking
 Tourism
3

SWITZERLAND: first session
Political system
Stability (political and economic)
Monetary policy
4

SWITZERLAND: political system
5

SWITZERLAND: political system;
decentralisation
The political system is from its origin rooted in :
 Power decentralisation (federalism) at two sub-levels:
 provincial («canton»), having their own executive, legislative and judicial
authorities
 district («commune») level
Principle: laws approved at the provincial and district levels must be in
compliance with the Federal Constitution, which specifies competencies and
responsibilities at the central and decentralised levels
 Taxes are in consequence levied and provide revenue for authorities at
three levels : central (30%) , provincial (40 %) and district (30 %)
 checks and balances
6

SWITZERLAND: political system;
Provinces
• Each province (“canton”) has its own constitution and
enjoys a great deal of autonomy
• Districts and Provinces, have their own administrative
authorities elected by the voting population. For some
local issues they take autonomous decisions on
security, education, health and population registry.
• The directors of sectors at provincial level meet in
relevant provincial conferences to coordinate and
decide on issues
• The governments of all provinces are represented in
the Conference of Provincial Governments, which
defends their interests with regard to the federal
government
7

SWITZERLAND: political system; the
National Assembly
• The National Assembly is made up of two chambers :
 the National Council is consisting of 200 Parliamentarians
representing the Provinces in proportion to the size of their
population.
 the Council of States is consisting of two Parliamentarians for
each Province, giving a total of 46
The make-up of the Assembly ensures that smaller Provinces are not
dominated by larger ones, the two chambers having equal weight.
• Role of chambers includes approving national law, supervising
government, proposing new laws, election of the Government
• The National Council speaker is the highest ranking person, above the
president of the country
8

SWITZERLAND: political system,
people’s rights
Political system gives eligible voters
decision-making and Constitution changing
power
 Any Swiss citizen and interest groups has the right to propose an initiative for
new legislation, when 100,000 signatures have been gathered in support , so
that the initiative can be put to a nation-wide vote, which occurred in 193
opportunities since 1893
 Any Swiss citizen and group opposed to a new law approved by the National
Assembly has the right to propose a referendum , when 50,000 signatures
within 100 days of the publication of the legislation have been gathered.
Then, eligible voters can approve or reject the new law.
• Votes takes place on initiatives related to the federal and/or provincial and/or
district levels in average 3-4 times per year
9

• Some key messages :
 Importance given to Civil Society Organisations
 Persistence of a government of coalition
including Ministers of the four biggest political
parties
 Pragmatism and consensus building are leading
principles
10

11

SWITZERLAND: stability
(political and economic)
• Political stability is rooted in :
 the will of Provinces to unite politically, since Switzerland
creation in 1291
 neutrality since 1515, meaning no intervention in military
disputes between other States
 the consolidation of the territory completed in 1815
 the Constitution adopted in 1848
12

SWITZERLAND: stability
(political and economic)
the security and peace, supporting the Organisation
for Security and Cooperation in Europe (OSCE)
Bilateral political (e.g. Schengen adopted in 2009
enabling a borderless area) and economic
agreements with the neighbouring European Union
 citizen rights, multipartism and the rule of law are
pillars of the political stability
13

SWITZERLAND: political stability
A political system system based on the
willingness to reach pragmatically consensus
through compromise
The checks and balances through the powers
of the National Assembly, the population
rights with initiatives and referendum, as well
as the independence of the judicial power
14

SWITZERLAND: economic stability
• Economy is based on highly skilled labor performing work on high
added-value goods (micro technology, biotechnology,
pharmaceuticals) and services (banking, insurance, tourism,
congresses etc. ), enjoying a high level of salaries.
• Nearly 70% of the workforce is employed by decentralized SMEs,
benefitting of the vocational training system
• At 3% the unemployment rate remains low, compared to European
countries (ranging from 4% (Austria) up to 24 % (Spain), whereas
Germany has 5.5 %, UK 8.2 % and France 10 %.
• Broadly shared concern that economic activity should have as little
impact as possible on the environment
15

• Swiss Transnational companies, covering a
diversity of goods and services, rooted in the
country are securing economic strength +
stability – e.g. ABB, Holcim, Novartis, Swiss-Re,
Zürich and… Nestlé (world no 1 for food,
278,000 employees, 97% outside Switzerland)
• Working culture promoting Public-Private
Partnership jointly involved in regulation
drafting and implementation
16

• The Social security system (some 33 % of
budget expenditures) is consisting of the:
national retirement pension fund
accident insurance at the workplace
invalidity insurance
income compensation allowances in case of
maternity
17

unemployment insurance
family allowances
compulsory health insurance
• The Social security system, as well as a high-quality
free educational system, both contribute
to social stability, which is an important
foundation of the economic stability
18

19

• Limited and targeted State intervention on
strategic issues (e.g. agriculture subsidies)
• Some 3% of GNI is spent on Research &
Development (R&D) related to industrial goods
and services.
R&D is paving the way towards innovation,
technology development and consequently
remain highly competitive + ensure tomorrow’s
job creation contributing to stability
20

SWITZERLAND: monetary policy
Switzerland is perceived as a safe haven due to
its :
political stability
Economic strength and stability
 Tradition of neutrality
21

In addition:
 political consensus building
 Education system
 Social security system
are three pillars contributing to ensure social peace
Consequently, the Swiss Franc (CHF) is strong ,
constitutes a reserve currency in high demand,
which the monetary policy has to manage
22

• Monetary policy of Switzerland relies on three pillars:
 the price stability, important condition for decision-making
by consumers and producers, as well as efficient
allocations of labor and capital.
 medium-term inflation forecast considering the supply of
money, loans, economic growth, exchange rates and
commodities prices
 Setting of a target range, extending over 1 % in the Swiss
franc money market, for the three-month Swiss franc
Libor aiming to keep it in the middle of the range
 National Banks purchase of Euros to stabilize the
exchange rate CHF/Euro
23

24

On top of regular instruments - open market operations,
bank reserve requirement, interest rate, re-lending and
re-discount - the Swiss National Banks uses:
 foreign exchange spot and forward transactions
 foreign exchange swaps
 purchase or sale of securities in Swiss francs
 Selling of derivatives, deriving their value from the
performance of an underlying entity such as an asset,
index, or interest rate on receivables, securities, precious
metals and currency pairs.
25

SWITZERLAND: second session
Connectivity
Education
Environment protection
26

SWITZERLAND: connectivity
• From landlocked to landlinked
27

SWITZERLAND : connectivity
• The Alps: natural barrier between Northern and Southern
Europe made an asset by building bridges, railways, roads
and tunnels
 Famous example: Gotthard pass with a 19km railway tunnel
built 100 years ago+a 16.9 km road tunnel built in 1980 (3rd
world longest) coping with an average of 20’000 vehicles/day
23

SWITZERLAND: connectivity
Efforts to promote fee-based transport of goods and
cars by railways tunnels instead of road tunnels to
protect the environment
and
income from heavy goods vehicles by introducing a
tax based on weight, km and fume
29

SWITZERLAND: connectivity, key
importance of the railways
Rail 2000 is a large-scale program of the public
railways company aimed at improving its
network
In 2004 phase I investment of nearly US $ 6
billions was completed to modernize the
equipment and intensify trains frequency
Phase II is being implemented involving
additional investments of minimum US $ 4
billions.
30

SWITZERLAND: public education
• Switzerland relies on a decentralized publicly-funded
education system (some 11% of national budget
expenditures) dealing with challenges in the face of
changes in society and the world and is coordinate with
the job market
• Primary and secondary schools free for all are
managed at provincial level.
• Provincial heads of education make up the Swiss
Conference of Education, which coordinates
education policy at the national level.
31

SWITZERLAND: education;
vocational training
• 67 % of 16-21 year-old opt for vocational training
for some 300 apprenticeship categories, which
combines practice in a company and with 1-2
days/week of theory at school during 3-4 years
• Some 100 higher technical schools are regulated
by the central government and enable students
to get Higher Diploma Degree for some 150
professions at middle-level management
32

SWITZERLAND: education
• Vocational training can be pursued at University
of Applied Sciences, applying higher vocational
education, including practical job-experience and
delivers Bachelor level graduation
• Higher vocational education trains students in a
broad variety of sectors: agriculture, architecture,
art, construction, design forestry, health,
psychology tourism, particularly hotel etc.
• The overall vocational training system is largely
funded by the private sector
33

SWITZERLAND: higher education
• 16 % of Swiss youth
graduate at tertiary level in:
• Two Federal Institutes
of Technology regulated
by the central government
+
• 8 Universities including
are regulated by their
provinces
34

SWITZERLAND: education
• At universities and institutes of technology,
women and men are approximately equally
represented
• 93 % of the 1.5 million students in the entire
Swiss educational system attend public schools
• some 7 % or 100’000 students from Switzerland
and 100 different countries attend the 240
schools of the Swiss Federation of Private Schools
.
35

SWITZERLAND:environment protection
and its 4 natural regions
36

and associated landscapes
37

SWITZERLAND:environment of
forests, lakes…
• 32 % of Swiss terrritory is covered by forests
(71% public, 29% privately owned), equally
distributed among regions (Alps 27%,
Lowlands 25%, Jura 41 % and Pre-Alps 35%)
• Switzerland has more than 1’500 lakes, 16 of
them > 10km2, which with rivers cover more
than 5% of the territory, representing 6 % of
European fresh water
38

SWITZERLAND:environment of
rivers
39

• Switzerland ranks second worldwide on the Environmental
Performance Index , which is due to the following factors :
 Policies relying on:
 binding legislation
 + voluntary measures adopted by the citizens
 … and 50’000 employees enforcing legislation and
implementing policies
 the land use planning, determining land use and in rural areas,
giving priority to agriculture over residential use, which tends to
grow quickly
40

• A whole range of general policies relate to :
 Disaster Risk Reduction/subsidized landscape
preservation also relying on agriculture
Promotion of the use of clean energy sources
Water quality : groundwater, rivers and lakes
 Air protection from pollution
 Biodiversity protection
Forest protection
Recycling and managing waste
41

 Disaster Risk Reduction/Landscape protection
42

Clean energy sources
43

hydropower
• Thanks to its mountainous topography and high
levels of annual rainfall, Switzerland has ideal
conditions for use of hydropower
• Some 580 hydropower plants account for 58% of
the electricity generated, approximately 50% of
which comes from run-of-river plants and the
50% from storage/reservoirs power plants.
• Hydropower market being worth around
US $ 1.8 billion (basis = 0.05 US $ per KwH), this
source of energy will play an increasing role
44

SWITZERLAND:
clean energy transportation
• Subsidized solar-powered transportation
Under R&D are :
 cars, existing prototypes, currently developed
 boats prototypes used for inland and ocean
transportation
microlight aircraft Solar Impulse circumnavigated
the earth in 2013
45

SWITZERLAND: bioefuels for the future
• Use of traditional fuels remains by far the most important, but cars are
obliged to use high quality filters to limit emissions and the Ministry of
Environment sets standards and enforces controls
• Besides, bioefuels start to be increasingly used:
• Gas used as a fuel by buses and lorries, reducing by 20% their
carbon emissions
• Biogas, produced by fermenting vegetable and timber waste, emitting no
more CO2 than that fixed by the plants when growing, is used in
Switzerland for public transport and to produce heating and electricity
• Biodiesel and bioethanol use is only incipient
46

SWITZERLAND:recycling
Separation of different types of waste for recycling –
glass 96 %, paper 70 % - allows to produce 10 % of
electric power
47

SWITZERLAND: third session
Investment
Small and Medium Enterprises (SME)
Banking
Tourism
48

SWITZERLAND: investment
Switzerland Global Enterprise is a public sector
institution (previously known as OSEC), which:
 informs potential foreign investors about the strengths
of Switzerland as a business location.
 supports the Provinces to attract foreign companies by
conducting market and trend analyses and coordinating
the activities of all bodies involved in promoting
Switzerland as a business location.
49

Foreign Direct Investment (FDI) in Switzerland reached
an all time high of 671551.30 CHF million in 2012
50

The Swiss Business Hubs are Global Enterprise’s representatives abroad
providing information about target market and help establish contacts.
Swiss FDI abroad amount to nearly 44’000 US $ million in 2012
51

SWITZERLAND: Small and Medium Enterprises
• Approximately 9 % of GDP is contributed by SME
• 99 % of enterprises are small/medium-size (SME):
 employing < 250 workers, nearly 70 % of the work force
 still in the hands of founding families
 are organized in Associations/Federations
• SME are employing highly qualified
labor to remain competitive ensuring :
 the supply of high added-value products
(e.g. microtechnology, biotechology)…
52

SWITZERLAND: Small and Medium
Enterprises
 …and services (e.g. finance, insurance,
tourism), which is now employing the higher
number of workers
the compliance with environmentally friendly
energy and transport policies
53

SWITZERLAND: SME figures
Size of enterprises Enterprises Employed persons
by full-time
equivalents
Number % Number %
Micro enterprises
(up to <10)
514'736 92.3 1'308'303 30.8
Small enterprises (10
to <50)
34'940 6.3 865'204 20.3
Medium enterprises
(50 to <249)
6'897 1.2 807'816 19.0
SME (up to 249) 556'573 99.8 2'981'323 70.1
Large enterprises
(250 and over)
1'256 0.2 1'271'539 29.9
Total 557'829 100 4'252'862 100
54

SWITZERLAND: SME policy,
e-government
• Services for SME start-ups - www.startbiz.ch – also of the
Ministry of Economy is also offered on-line to register them
with social insurance, the Commercial Register, VAT and
accident insurance, saving a time assessed at 50%
Roof photovoltaic
systems supported
by “SME start-ups”
• Electronic business transactions is facilitated by an
electronic proof of identity providing a legally valid digital
signature for business transactions .
55

SWITZERLAND: SME policy
The central Government has tailored an SME policy,
relying on related regulation, standards and subsidies
contributing to ensure competivity :
 e-government to ease SME administrative burden
 business financing facilitation
 the market access improvement
 The needed training and education
 resources earmarking for Research & Development,
key to foster innovation
56

SWITZERLAND: SME policy, ease the
administrative burden
• Measures adopted include :
 Exchange of information and coordination between Ministries
is ensured to reduce regulatory costs
 New regulations ex-ante impact assessment on SME is carried
out by the Ministry of Economy, with a special emphasis the
regulatory costs and identify the potential for cost reduction.
 A public-private SME Forum meeting 6 times a year discusses
new regulations related to SME various branches of industry;
70 % of its recommendations to ease the administrative
burden on SME were implemented
57

e-government
• SME web portal - www.kmu. admin.ch - of the
Ministry of Economy offers for existing
enterprises on-line services to:
 generate salary statements,
 order debt collection reports
 inform about a business partners and recent issues
 apply for an entry in the commercial register
 register a trademark
 access criminal records, etc.
58

financing
• SME financing needs are supported by a range of public
and/or private supportive institutions and measures such as:
 The Government supports SME to access capital by providing
guarantees of up to US $ 500,000, bearing 65% of the risk of loss
 Ministry of Economy public-private “SME capital market” working
group, which keeps track of developments in lending to SME
 The Swiss Society for Hotel Credit is a public-private financed
cooperative which helps hotels, draw up feasibility studies,
business plans, as well as fund infrastructure investments
 The private Invest supports start-ups in search of capital. It offers
young entrepreneurs a platform to present their business ideas to
a wide audience of business angels and venture capital firms.
59

export financing
• Service support in securing export
• The public sector Swiss Export risk insurance (SERV) gives
SME security when conducting business abroad in
politically and/or economically risky countries
• For SME having reached their guarantee and credit limit
with their bank, SERV provides a guarantee to cover a
possible debt default, , which enables the SME to get the
required capital from the bank, hence gives the SME the
liquidity to take on new business and expand.
.
60

market access
• Switzerland global Enterprise depending on the
Ministry of Economy has a public mandate to:
 help SME promoting trade and investments
 support SME to access new markets through market
analyses and its global network of experts
 support foreign SMEs in selected partner countries
by opening up new business opportunities in
Switzerland , which strengthens cooperation and
trade between Switzerland and partner countries
61

Research&Development (R&D)
• Public Federal institutes of technology and
universities of applied science have the latest
findings and SME, in the frame of
Public-Private Partnerships, can entrust them with
R&D they can not afford to do
• the State Secretariat for Education, research and
innovation is providing optimal conditions for
research and ensures funding
62

Research&Development (R&D)
As SME makes up just 16% of total annual R&D
expenditure, Public research institutions offer SME:
 the possibility to acquire the rights to use their
findings
 Advice, analyses, assessments and reports
 The latest equipment and infrastructure, made
available, when there is mutual interest
63

SWITZERLAND: SME policy, innovation
• The Commission for Technology and Innovation is the
Government’s instrument for innovation promotion.
It banks on the fact that perceived opportunities to start an SME are
higher than the average for innovation-driven economies
(Switzerland is ranking 4th)
 helps SME develop their ideas and develop them in a way that they
become marketable products
 Provides funding and advice, thereby channeling scientific research
when innovation is stalling or market potential is untapped.
 offers to SME “start-up” founders coaching to facilitate fundraising
and develop a market entry strategy. The best companies are
awarded the Start-up Label giving access to venture capital
64

SWITZERLAND: SME policy, innovation
 encourages the transfer of knowledge and
technology between universities and industry,
through a national thematic network bringing SMEs
and public research institutions together to exchange
 co-funds SME R&D projects
and funds new technologies
in the areas of life sciences,
engineering, micro and
nanotechnologies
Nanotubes
65

SWITZERLAND: banking diversity
• The financial sector employs 6 % of the
workforce and exerts a major influence on
employment in the overall Swiss economy
• There is a diversity of more than 300 banks of
different types: commercial, cooperative,
private banking, provincial etc. ) including
foreign ones
66

SWITZERLAND: banking, facts and
figures
• UBS (largest bank) and Credit Suisse (ranking
second) are two Transnational banks:
 having a share of domestic deposits and loans of
some 30%;
are among the most influent in the global financial
market, including controversial offshore funds
Have assets some six times higher than
Switzerland GDP
67

• Private banking relies on a tradition starting back
in the 17th century facing increasingly
competition from major banks and they assume
unlimited liability, if they go bankrupt, they lose
their entire fortune
• Provincial Banks are owned by the Provinces, at
least as majority stakeholder and they:
 provide financial services, including low-interest
loans, to their home Province
 are linked nationally in a Provincial Banks Group
68

• Cooperative banks, based on the “Raiffeisen
model”, third biggest bank in Switzerland, with
a network of nearly 1’100 decentralized
branches at rural level:
 is operating independently;
 its 1.8 million members takes
part in decision making and
bearing joint responsibility for their branch
 is offering financial services to SME and the
agriculture
69

PostFinance bank is a public limited company, the
Swiss fifth biggest bank and a leading retail financial
institutions for cash transactions, offering daily
financial: payments, savings, pensions, as well as
investing in real estate and securities.
70

SWITZERLAND: policy convergence the
example of clean technology
Clean technology provides a synthetic example of
convergence between environmental, economic,
investment, SMEs, banking – and social policies
 Swiss economy is based on the production by SMEs and
Transnationals of high added-value goods, an excellent
backdrop for a growing Cleantech
 In consequence, Switzerland became pioneer in clean technology
investment:
 Private Bank Sarasin paved the way since 1989
 in the early 2000 Sustainable Asset specialized funds, started to spread
 leading the country to progressively become a financial global hub of a
wide range of cleantech investing in public and private companies
71

SWITZERLAND
 Public sector friendly government regulation and stimulus
package targeted towards cleantech are aiming at energy
efficiency, and renewable energy, presently for Switzerland
a 1.6 trillion US $ business, expected to double until 2020.
 Current workforce in cleantech is near to 5% of
employment, many in SMEs, often sub-contracted by Swiss
multinationals
 The Swiss Minenergie is an advanced rating system for
green (environment friendly) building, delivering a quality
label for low energy consumption buildings, fostering
investment accordingly
72

SWITZERLAND: tourism,
facts and figures
 Nearly US $ 16 billion of earnings ranking 19th worldwide, but 27th with
8.4. million foreign visitors
 6% of GDP
 Fourth source of export
revenue, after
production of watches,
ranking 3rd
 Employer of 4.4 % of the workforce in 30’000 businesses, share being
higher in mountains than in cities
 Among the five most competitive travel and tourism sector in the world
74

SWITZERLAND: tourism in mountains
• Mountains are a key stimulus for summer and
winter tourism
• Business-related infrastructures encompasses
hotels, holidays apartments, restaurants,
spas, congress halls,
mountain trains, cable
railways, cable cars, ski-lifts, car
parks and other infrastructure
connected to winter sports
75

SWITZERLAND: tourism
• As Swiss labor and input costs are higher than
foreign competitors tourists from strong
currency BRICS are increasingly targeted
• Swiss tourists represent some 40 % of hotel
guests
• The Swiss Hotel Association is committed to
ensure hospitality education at all levels,
intercultural and multilingual skills, consulting,
audit/certification, provide information etc.
76

SWITZERLAND: tourism policy
Policy objective: use natural landscape potential to create jobs and
increase their value added
Tourism policy is based on 4 pillars:
1) Strategic issue management to identify and seize opportunities at
an early stage and discuss issues as member of the World Tourism
Organization
2) Embed tourism policy in economic policy, as tourism relies on:
(i) price stability;
(ii) a fiscal policy with low taxes
(iii) a business-friendly legal framework
(iv) opening up of the Swiss labor market to foreign workers
77

SWITZERLAND: tourism policy
3) increase tourism attractiveness through:
(i) knowledge transferred into laws
(ii) Combine services in holiday packages
(iii) capacity of hotel industry to cope with the
expectations of a price-conscious
increasingly demanding customers
4) rely on a National tourism office ensuring
coordination in sectorial policies such as land
planning, agriculture, industrial development.
78

SWITZERLAND: tourism marketing
• http://www.myswitzerland.com
is a multilingual private website informing on tourism and supported
by public funds
…key marketing point being
moutainous landscapes
and cities
79

SWITZERLAND: marketing
“Presence Switzerland”:
 is the Ministry of Foreign Affairs’ institution in
charge of promoting the knowledge about and
the image of Switzerland abroad
 supports Switzerland’s interests
 implements its task of communication abroad in
cooperation and coordination with other
Ministries concerned and the involvement of the
private sector
80

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